Travel & Subsistence Revenue Audits
Revenue Contractors’ Project
In late 2012, the Revenue Commissioners commenced a project of conducting audits in the South-West region to review the tax affairs of third party services provider companies. As of July 2013, this project has been rolled out to all Revenue regions.
The initial project in the South-West region uncovered underpayments of tax as a consequence of overstated or exaggerated expense claims in these businesses which lead to an under-declaration of PAYE and PRSI, particularly in relation to travel and subsistence expenses claimed in error. This topic will, therefore, be Revenue’s main focus in the roll-out of this project nationally. In addition to a review of expenses claims, the following areas are of particular interest to Revenue:
- Wage understatement
- Payment to family members (i.e. employing spouses or children)
- Improper deductions/expenses claimed.
Travel & Subsistence
One of Revenue’s main areas of focus, and one which has yield additional tax revenue, relates to expenses claims for travel and subsistence. Under revenue guidance, employees can only be reimbursed free of tax in respect of travel and subsistence expenses necessarily incurred in preforming the duties of employment:
- Reimbursement of expenses by the Company will not be taxable where the directors or employees necessarily incur expenses of travel (and subsistence relating to that travel) in the performance of the duties of their office or employment (i.e. for ‘business journeys’).
- Reimbursement may be made by way of either ‘flat rate’ allowances or vouched receipts but not both.
- If a receipt is not available for an expense, then any reimbursement of such expenses may not be paid tax-free and therefore, may be liable at that employee’s marginal income tax rate plus PRSI and USC.
Mileage Claims
- If employees/directors use their own personal car for the purpose of the Company’s business, they can claim motor expenses for annual travel, rates are set determines by the Revenue. It is necessary that an account is kept of all mileage in KM for each year so as to ensure that employees are not claiming at the incorrect rate.
- Business journeys from the ‘normal place of work’ to another location may be claimed for mileage purposes.
- ‘Normal place of Work’ is defined as the place where the employee normally performs the duties of his/her employment. The ‘home office’ argument will not be accepted if it is not the ‘normal place of work’. It is Revenue’s opinion that the place where the administration of the contractor is carried out and where the books are kept (whether this is at the registered office of the contractor or his/her home), does not constitutes a ‘normal place of work’
- Where business journeys commences from home or return directly to home from a business journey, then the expenses of travel that may be reimbursed without deduction of tax are the lesser of those incurred on the journey between –
1. home and the temporary work location: or
2. the normal place of work (i.e. office) and the temporary work location.
- Expenses incurred travelling to and from work are not considered business journeys and, therefore cannot be reimbursed tax-free.
- Travel from home to the airport and on to a location abroad on a temporary work assignment and returning to your home will be considered a business journey.
- Payment of taxi fares from work to home are generally taxed as a perquisite. There is an exception where a taxi is provided on an irregular basis in situations where the employee/director is required to work after 10.00pm or finish work before 6.00am.
- Where the employee/director works at more than one location on a daily basis, the reimbursement of expenses of travel incurred in travelling between these separate locations may be made tax-free but not between home the location and vice-versa.
Subsistence Allowance
Reimbursement may be made by way of either ‘flat rate’ allowances in accordance with the Civil Service rates or vouched receipts but not both.
Summary
If you need further information on any of the above please contact us and one of our highly qualified team of tax professional will be able to assist you on all aspects of this project.
